By Marty Woodrome
Mortgage Loan Originator
In my work as a mortgage loan originator, I am often called upon to provide financing to clients who are obtaining a mortgage as a means of bringing their divorce proceedings to settlement.
As you are fully aware, if a couple has been together for a while and property has been amassed during their marriage, a mortgage is often required.
Some clients require a refinance loan to free their capital so that they can offer the other spouse a cash settlement. In other instances, sale of the property is required and securing financing quickly for the new purchasers is helpful.
Here are answers to four common mortgage questions that divorced men often ask.
- Can I call my mortgage lender to have my name taken off the home loan?
- How much of my home’s value will I be able to borrow if I owe my spouse part of the equity?
- If my name is still on the mortgage and my spouse is responsible for the payment per the divorce decree, will it affect my credit if a payment is missed?
- Can I qualify for a new mortgage if my name is still on my old loan?
Can I call my mortgage lender to have my name taken off the home loan?
No. The loan will have to be refinanced in order to remove the other party’s name from the note and mortgage. You cannot simple request that someone’s name be removed from the loan.
How much of my home’s value will I be able to borrow if I owe my spouse part of the equity?
It will depend on your credit and the loan product the lender has to offer. As a rule you should be able to borrow 80% of the appraised value of the home.
Your lender will order the appraisal and they will lend you 80% of the “as is” value of the home. There are FHA and VA loans that will allow you to borrow more than the 80%.
If my name is still on the mortgage and my spouse is responsible for the payment per the divorce decree, will it affect my credit if a payment is missed?
Yes. If your spouse misses a payment the delinquency will be reflected on your credit report regardless of what the divorce decree says. The mortgage is still in both names and will be reflected on both parties’ credit reports.
Can I qualify for a new mortgage if my name is still on my old loan?
Possibly. The lender will count your new mortgage loan and your old mortgage loan payment into your debt-to-income ratio. If that ratio is too high you may be turned down for excessive obligations.
The debt-to-income ratio that is very common in the industry is 28% front-end ratio and 40% back-end ratio. The front-end ratio is all debts, excluding your home payment, and the back-end ratio includes all debts with the home loan(s).
Marty Woodrome is a mortgage loan originator with Regions Mortgage in Belleville, Illinois. Contact him at firstname.lastname@example.org.